First Internet Bancorp (OTCBB:FIBP), parent company of First Internet Bank of Indiana (www.firstib.com), a premier provider of online retail and business banking services nationwide, today announced significantly improved unaudited financial results for the quarter and nine months ended September 30, 2012.
David Becker, chairman and CEO, commented: “Our ability to achieve record financial results along with significantly enhanced shareholder value throughout 2012 reflects our success in growing First Internet’s national mortgage origination platform and continuing to build our commercial real estate and commercial and industrial lending businesses, which are growing at a solid and healthy pace.
“Our consumer and retail customers benefit from our streamlined Internet-based business model using robust technology and efficient processes which complements our unparalleled customer experience.
“Our continuing investment in quality people, technology and Web-based marketing has enhanced our nationwide visibility, driven our ability to qualify and originate more loans, provide responsive service and to manage operations with a high degree of efficiency.
“We anticipate a low interest rate environment for the foreseeable future and growing demand for home mortgage refinancing as real estate prices appreciate and provide greater equity to borrowers who may have been previously unable to refinance their homes. An improving housing market may allow additional consumers to seek lower mortgage rates, along with an expected uptick in first time home borrowers, which we also finance.
“While the vast majority of the residential mortgages we originate are sold in the secondary market, we fully expect that a rising interest rate environment could open the door to greater retention of certain high quality adjustable rate mortgage loans on our balance sheet. This would provide an opportunity to build out our servicing platform which would create more cross-selling possibilities.
“As our consumer mortgage business has been generating exceptional results, we have also been rapidly building our CRE and C&I businesses established in 2010 and 2011. We have already expanded the scope of the commercial businesses we serve and believe our model is scalable, where and when appropriate. The bank is in the process of expanding its commercial deposit gathering efforts and we have a significant pool of pending new customer deposits, which will be linked to new lending customer accounts.”
Income Statement Reflects Growth, Expense Management
Net income for the quarter ended September 30, 2012 was $1.63 million or $0.85 per diluted share, up 113% compared with $765,000 or $0.40 per diluted share for the quarter ended September 30, 2011. For the nine months of 2012, net income was $4.05 million or $2.12 per diluted share compared with $2.13 million or $1.12 per diluted share for the nine months of 2011.
Net interest income after provision for loan losses was $2.82 million in third quarter 2012 compared with $3.07 million in third quarter 2011. In the nine months of 2012, net interest income after provision for loan losses was $9.45 million compared with $9.13 million in the nine months of 2011. By re-pricing accounts to reflect the continuing low-interest rate environment and a reduced use of wholesale deposits, the company lowered its total interest expense in third quarter 2012 to $2.17 million compared with $2.41 million in third quarter 2011. Year-over-year comparisons of total interest income were relatively similar, while total interest expense was lower in the third quarter and nine months of 2012 versus the previous year’s periods.
The company grew interest-bearing accounts, savings, time deposits and money market accounts, ending the September 30, 2012 period with $522.66 million in deposits compared with $464.11 million at September 30, 2011.
Net interest margin was 2.64% during the nine months of 2012 compared with 2.78% for the same period in 2011. Becker explained that the bank has been actively rebalancing its mortgage backed securities portfolio, and the margin partially reflects prepayment penalties related to writing down premiums. Becker said that while First Internet has experienced interest rate compression, as have most banks, its efficient operation enables the bank to offer competitive rates on interest-bearing accounts to attract core deposits that help support its lending activities.
“Our operating model – which does not rely on bricks and mortar facilities – enables us to effectively produce sound financial results with a lower margin than most typical community banks,” he stated.
Total non-interest income in third quarter 2012 was $3.53 million compared with $816,000 in third quarter 2011. For the nine months of 2012, total non-interest income was $7.81 million compared with $1.74 million for the nine months of 2011. The growth primarily represented an approximately fourfold growth in gain on loans sold.
“We have enjoyed tremendous success in growing our mortgage origination business from coast to coast, and our success in doing so has allowed us to invest in talented people to continue expanding our CRE and C&I lending business,” explained Becker. “We have an efficient process in place that enables us to obtain very competitive rates for our mortgage customers, with lower than typical fees, and faster than average closing times. The bank’s credit review and underwriting procedures are supported by experienced account representatives and underwriting staff. Customers are responding positively to the ease of the First Internet banking experience, which we believe is a key driver in building our mortgage business.”
Total noninterest expense in third quarter 2012 was $4.11 million compared with $2.95 million in third quarter 2011. For the nine months of 2012, non-interest expense was $11.78 million compared with $8.30 million for the nine months of 2011. This increase primarily reflected increases in salaries and employee benefits, marketing expenses, loan-related expenses. The nine months of 2012 also included a one-time $400,000 restructuring expense.
“We have hired a number of additional loan processors and account representatives in our mortgage business, and have also grown our Indianapolis-based commercial lending team and expanded the scope of our market,” said Becker. “We believe in rewarding our employees for success, and our team has earned its compensation with exceptional performance.
“Between 2011 and 2012, we also escalated marketing outreach and we believe this has played an important role in driving new business,” Becker noted, adding that facility and technology expenses declined slightly year-over-year, demonstrating the bank’s ability to drive increasing revenue through a relatively fixed operating platform.
Balance Sheet Growth, Capital Position and Outlook
The company’s total assets of $627.68 million represent an all-time high for First Internet Bancorp. Net loans after allowance for loan losses were $348.84 million compared with $331.04 million at September 30, 2011.
Becker said the loan portfolio includes a growing number of commercial loans as the company’s commercial lending team continues to gain traction after being formed in 2011. “We have built a meaningful pipeline in commercial lending,” he noted. “We continue to see an opportunity to serve small businesses whose borrowing options have been limited by the largest banks which are focusing on larger business customers and smaller banks which are capital constrained.”
CRE loans increased to $70.88 million at September 30, 2012 compared with $37.66 million a year ago. The balance sheet as of September 30, 2012 included $20.17 million in C&I loans, all of which were new assets to the bank since the prior year.
Non-performing loans were $8.96 million at September 30, 2012, compared with $6.15 million at September 30, 2011. Two commercial credits – one for $1.9 million and another for $3.8 million – comprise the majority of the bank’s non-performing loans. The bank has already reserved for both credits in excess of what management believes will be any potential loss on sale, and is in active discussions with potential buyers.
Becker said the company’s asset quality has been consistently higher than many peers’. Non-performing loans plus past due loans as a percentage of total assets was 1.66% at September 30, 2012, compared with 1.62% at September 30, 2011. The allowance for loans and lease losses as a percent of total loans was 1.56% at September 30, 2012 compared with 1.46% at September 30, 2011.
First Internet is well capitalized under regulatory capital guidelines, with tier 1 capital to average assets ratio of 8.52% at the bank and 8.71% at the holding company.
Becker concluded: “The success of our business model has positioned First Internet to expand and diversify its capabilities while maintaining the highly efficient operation that has facilitated consistent earnings growth. We believe our sound balance sheet and growth of core deposits can increasingly support lending activities without using brokered funds as in the past. We are proud of what we’ve accomplished, and look forward to continued expansion of the First Internet Bank franchise.”
About First Internet Bancorp
First Internet Bancorp (OTC Bulletin Board: FIBP), the parent company of First Internet Bank of Indiana, is privately capitalized with over 220 private and corporate investors. First Internet Bank opened for business in 1999. The Bancorp became effective March 21, 2006.
About First Internet Bank
First Internet Bank of Indiana (First IB) is the first state-chartered, FDIC-insured institution to operate solely via the Internet and has customers in all 50 states. Deposit services include checking accounts, regular and money market savings accounts with industry-leading interest rates, CDs and IRAs. First IB also offers consumer loans, conforming mortgages, jumbo mortgages, home equity loans and lines of credit, and commercial loans. First IB is a wholly owned subsidiary of First Internet Bancorp.
Safe Harbor Statement
Statements in this press release which express “belief,” “intention,” “expectation,” and similar expressions, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, such management. Such statements are inherently uncertain and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those contemplated by the forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Financial Tables Follow
|Consolidated Balance Sheet ($000s) (Unaudited1)|
|Cash and due from banks||2,386||1,910|
|Securities - AFS||149,971||171,323|
|Loans held for sale||44,425||55,490|
|Net deferred (fees)/expenses||3,677||3,807|
|Allowance for loan losses||(5,570||)||(6,400||)|
|Accrued interest receivable||2,243||2,263|
|Bank owned life insurance||8,087||11,442|
|Other real estate owned||1,834||553|
|Non-interest bearing demand deposits||15,973||12,072|
|Interest bearing demand deposits||56,688||65,189|
|Savings and money market deposits||167,277||205,450|
|Accrued interest payable||98||98|
|Accrued payroll and related expenses||1,263||1,686|
|Total liabilities & equity||561,293||627,678|
|Consolidated Income Statement ($000s) (Unaudited1)|
|Other interest income||11||18|
|Total interest income||6,113||5,968|
|Deposit interest expense||2,065||1,829|
|Other interest expense||343||342|
|Total interest expense||2,408||2,171|
|Net interest income||3,705||3,797|
|Provision for loan losses||634||974|
|Net interest income after provision||3,071||2,823|
|Service charges and fees||284||226|
|Gain on loans sold||637||3,206|
|Other-than-temporary impairment loss||(123||)||(112||)|
|Gain(Loss) on asset disposals||(60||)||113|
|Other non-interest income||78||99|
|Total non-interest income||816||3,532|
|Salaries and employee benefits||1,366||2,161|
|Marketing, advertising and promotion||242||278|
|Consulting and professional fees||176||438|
|Premises and equipment||456||315|
|Deposit insurance premiums||110||121|
|Other non-interest expense||205||198|
|Total non-interest expense||2,947||4,107|
|Income before taxes||940||2,248|
|Weighted average shares||1,906,954||1,913,786|
|Consolidated Income Statement ($000s) (Unaudited1)|
Nine Months Ended
|Other interest income||43||55|
|Total interest income||18,009||18,051|
|Deposit interest expense||6,371||5,475|
|Other interest expense||1,013||1,019|
|Total interest expense||7,384||6,494|
|Net interest income||10,625||11,557|
|Provision for loan losses||1,493||2,108|
|Net interest income after provision||9,132||9,449|
|Service charges and fees||876||719|
|Gain on loans sold||1,427||6,991|
|Other-than-temporary impairment loss||(556||)||(204||)|
|Gain(Loss) on asset disposals||(239||)||12|
|Other non-interest income||228||290|
|Total non-interest income||1,736||7,808|
|Salaries and employee benefits||3,871||6,066|
|Marketing, advertising and promotion||536||1,010|
|Consulting and professional fees||513||1,037|
|Premises and equipment||1,136||1,092|
|Deposit insurance premiums||609||341|
|Other non-interest expense||569||687|
|Total non-interest expense||8,301||11,784|
|Income before taxes||2,567||5,473|
|Weighted average shares||1,905,604||1,911,846|
1 Financial results for the Bancorp are audited by external accountants on an annual basis; however, external auditors are not engaged to review quarterly information.